By Joseph Adinolfi, MarketWatch

Turkish lira falls to all-time low against buck

NEW YORK (MarketWatch) -- The euro rebounded from an 11-year low Thursday as investors looked ahead to Friday's nonfarm payrolls report from the Bureau of Labor Statistics.

The shared currency hit an 11-year low earlier in the session after European Central Bank President Mario Draghi said the central bank wouldn't buy bonds with yields lower than the central bank's deposit rate of negative 0.2%.

Steve Englander, global head of G10 FX strategy at Citigroup, said that based on the recent stream of underwhelming economic data, Friday's number will likely fall short of lofty estimates. If

If this happens, traders will likely focus on the reasons behind a decline -- mainly whether or not bad weather or striking refinery workers could be to blame.

"If we get 200,000 and a downward revision for the prior two months of 60,000, then investors might think 'wait a second, maybe all this optimism on labor markets has been overdone,'" Englander said. "If it turns out that it's largely weather related, I think investor will be calm about it and just look though it and say "well, we'll make it up'."

The consensus estimate of analysts polled by MarketWatch is 238,000.

The euro (EURUSD) traded at $1.1025 Thursday afternoon after falling to $1.0987, its lowest level since September 2003.

It (EURGBP) also hit a multiyear low against the pound of 72.20 pence, its lowest level since December 2007, but recovered slightly to 72.36 pence in recent trade.

On Wednesday evening, the shared currency had traded at 72.58 pence and $1.1077 to the dollar.

Draghi struck an upbeat tone in his initial statement during his Thursday news conference in Nicosia, Cyprus, saying that the recent stream of stronger-than-expected eurozone economic data has led the ECB to revise its economic projections upward. The central bank now expects annual real GDP to increase by 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017.

"The risks surrounding the economic outlook for the euro area remain on the downside but have diminished following recent monetary policy decisions and the fall in oil prices," Draghi said.

The euro traded higher after the initial statement, hitting a session high of $1.1116, but its momentum was abruptly halted during the question-and-answer session, when Draghi said the central bank wouldn't buy eurozone bonds with yields lower than its deposit rate of negative 0.2%.

Josh O'Byrne, a London-based G10 FX Strategist with Citigroup, said this means the spread between short-term and long-term eurozone bonds will compress as the ECB buys longer-duration debt, dramatically reducing the risk premium for holding paper with longer maturitis, while also giving investors more incentive to look abroad for higher-yielding debt.

See: Here are the eurozone yields with the most room to fall (http://www.marketwatch.com/story/here-are-the-eurozone-yields-with-the-most-room-to-fall-2015-03-05).

"Given that a lot of core [euro-denominated] fixed income is already trading below that [negative 0.2% yield], this means there's going to be increasing purchases further on the curve," O'Byrne said. "If you have some discretion, you're not going to be [buying eurozone debt]."

Draghi didn't mention the euro in his policy statement, a departure from recent meetings where he highlighted the impact of diverging monetary policy in Europe and abroad on exchange rates.

O'Byrne said that this means the push for a lower euro will no longer be driven by policy makers, but by investors coping with the side effects of the ECB's stimulus measures.

"Behind the scenes, I think they would rather see [the exchange rate] stabilize, but the market is going to do what it's going to do, and having fewer attractively-priced assets in the market is going to increase the incentive for outflows," O'Byrne said.

Turkey

The Turkish lira fell to an all-time low against the dollar Thursday as President Recep Tayyip Erdogan ratchets up political pressure on Erdem Basci, the governor of Turkey's central bank, to lower interest rates at a faster clip.

The lira (USDTRY) traded as low as 2.62 lira to the dollar, compared with 2.56 Wednesday.

Last week, Erdogan said that Basci could be acting in accordance with foreign interests, and that defending high interest rates could be treasonous, (http://www.wsj.com/articles/turkish-officials-seen-stoking-crisis-as-lira-hits-record-low-1425553837) The Wall Street Journal reported.

The lira has depreciated by about 10% this year, making it the worst-performing emerging-market currency after Ukraine's hryvnia, which has lost nearly 50% of its value against the dollar since Jan. 1.

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